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Taiwanese chip manufacturers are investing heavily in DRAM production capacity, even as manufacturers elsewhere turn their attention to more lucrative NAND flash production.

ProMOS Technologies Inc. on Wednesday became the latest Taiwanese company to break ground on a new, US$2.5 billion DRAM factory. It’s the company’s third such facility. It’s also the fourth DRAM ground-breaking this year for Taiwan, and once current projects are up and running, the island will boast 10 state-of-the-art factories capable of making chips on 12-inch (300-millimeter) wafers.

“The Taiwan government continues to encourage the development of the DRAM industry,” said Shih Yen-Shiang, vice-minister of economic affairs on the island.

Taiwan hopes the semiconductor and LCD (liquid crystal display) industries will continue to act as the cornerstone of economic development for its economy for the next decade. To encourage new investments, the government has established a number of high-tech industrial parks on the island, where companies can find incentives such as low land rental fees, tax breaks and grants for research and development.

ProMOS’s new factory in the Central Taiwan Science Park will open late next year using some of the world’s most advanced production technology to etch features 70 nanometers in size on chips.

It will need the technology to keep up with other players in the cutthroat DRAM industry. There’s a reason other companies are focusing more on NAND flash memory: the chips are used in fast-growing product areas such as mobile phones, iPods, digital cameras and other consumer electronics. And they command higher prices.

The PC market, where most DRAM chips end up, is not growing as fast, and rivals in the industry such as South Korea’s Samsung Electronics Co. Ltd. and Hynix Semiconductor Inc. keep the pressure on each other to offer the lowest prices possible.

But the two companies, which turned South Korea into the largest DRAM exporter in the world, have concentrated their efforts more on NAND flash memory over the past few years, while Taiwanese companies have focused on DRAM.

South Korea accounts for 44.2 percent of global DRAM sales now, while Taiwan is up to 19.5 percent and rising, according to Gartner Dataquest. But Taiwan’s share of world DRAM production could be as high as 25 percent, some analysts say, because some Taiwanese companies manufacture DRAM that is later sold by other companies. For example, Powerchip Semiconductor Corp. makes chips for Japan’s Elpida Memory Inc. The Taiwanese are even being credited for their quick uptake of new production technologies.

Hynix, for example, works with ProMOS by sharing manufacturing technology in return for output, and says the Taiwanese company uses the technology more efficiently.

“Hynix develops technology and after it is ready, sends it to ProMOS. After 3 months, ProMOS achieved better yields than Hynix. It’s amazing,” said Sung Wook Park, head of R&D at Hynix, during ProMOS’s ground breaking ceremony.